TaxTMI 
TaxTMI 
2015 (11) TMI 174
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....s of the case are : The assessee is a company registered under the provisions of Companies Act and is engaged in manufacturing of Internal combustion Engine Valves used in four strokes engines of two wheeler, three wheeler and four wheeler vehicles and also in four stroke generator engines. The assessee company is a joint venture between Varroc Group and Scarpa & Colombo of Italy. Varroc Group is holding 74% stake in the assessee company and remaining 26% stake is held by Italian company. The assessee filed its return of income for the assessment year 2008-09 on 30-09-2008 declaring loss of Rs. 48,93,720/-. During the impugned assessment year, the assessee had entered into international transactions. The case of the assessee was selected for scrutiny and accordingly, notice u/s. 143(2) of the Act was issued to the assessee on 17-08-2009. In respect of international transactions entered into with 'Associated Enterprises' (AE) the matter was referred to the Transfer Pricing Officer (TPO) for determining Arm's Length Price (ALP). One of the issues referred to the TPO was with respect to payment of sales commission by assessee to the AE for procuring export orders from Fiat and General....
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....7-08 and assessment order dated 19-12-2011 for assessment year 2009-10. The ld. AR further contended that the Department cannot decide for the assessee, whether commission is to be paid or not? Or at what rate commission is to be paid. It is the prerogative of assessee to decide the manner in which business is to be conducted. In support of his contentions, the ld. AR placed reliance on the decision of Hon'ble Delhi High Court in the case of CIT Vs. Cushman and Wakefield (India) Pvt. Ltd. reported as 89 CCH 76 (Delhi) and the decision of Hyderabad Benches of the Tribunal in the case of TNS India Pvt. Ltd. Vs. ACIT reported as 32 ITR (Trib) 44 (Hyderabad). 3.1 With regard to second ground raised in the appeal, the ld. AR contended that there was minor delay in depositing in the employee contribution towards ESIC. However, the said amount was deposited before the due date of filing of return under the provisions of the Act. The ld. AR submitted that it is a well settled law that if the amount has been deposited before the due date of filing return under the Act, the same is allowable. In support of his submissions, the ld. AR placed reliance on the decision of Hon'ble Bomb....
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....ales 364,009 411,345 439,072 588,336 Sales Commission Amount paid to AE - 987 2,118 4,440 % Compared with Non AE sales - 2% 2% 2% A perusal of exports turnover staring from F.Y. 2005-06 to F.Y. 2008-09 shows that there has been steady increase in the export sales. 6. The ld. AR has placed reliance on the judgment of Hon'ble Delhi High Court in the case of CIT Vs. Cushman and Wakefield (India) Pvt. Ltd. (supra). In the said case the Hon'ble High Court has held that the jurisdiction of TPO is to conduct a transfer pricing analysis to determine ALP and not to determine whether there is a service or not form which assessee benefits. That aspect of exercise is left to the Assessing Officer. The TPO cannot determine ALP of payments made by assessee to its AE at NIL taking a view the assessee did not derive any benefit from services rendered by AE. 7. The ld. AR also placed reliance on the decision in the case of TNS India Pvt. Ltd. Vs. ACIT (supra). In the said case the Co-ordinate Bench while adjudicating the jurisdiction of TPO held that the role of TPO is limited in determining ALP. The TPO cannot question the business decision of payment and determine ....
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....ing Officer did not believe the same in the absence of concrete evidence. Unless the Assessing Officer steps into the assessee's business premises and observes the role of these companies/the assessee's business transactions, it will be difficult to place on record the sort of advice given in day-to-day operations. What sort of evidence satisfies the Assessing Officer is also not specified. The assessee has already placed lot of evidence in support of claims. Therefore, on that count, we are not in agreement with the Assessing Officer and the Transfer Pricing Officer that services were not rendered by the group companies to the assessee. 23. Even otherwise, the role of the Transfer Pricing Officer is to determine the arm's length price of a transaction. He cannot reject the entire payment under the provisions of section 92CA as held by the hon'ble Delhi High Court in the case of EKL Appliances Ltd. Ltd. [2012] 345 ITR 241 (Delhi) wherein the hon'ble Delhi High Court, on similar facts where the Transfer Pricing Officer also determined the arm's length price at nil, has held as under (page 254) : "21. The position emerging from the above deci....
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....art from the legal position stated above, even on the merits the disallowance of the entire brand fee/royalty payment was not warranted. The assessee has furnished copious material and valid reasons as to why it was suffering losses continuously and these have been referred to by us earlier. Full justification supported by facts and figures have been given to demonstrate that the increase in the employees' cost, finance charges, administrative expenses, depreciation cost and capacity increase have contributed to the continuous losses. The comparative position over a period of five years from 1998 to 2003 with relevant figures have been given before the Commissioner of Income-tax (Appeals) and they are referred to in a tabular form in his order in paragraph 5.5.1. In fact there are four tabular statements furnished by the assessee before the Commissioner of Income-tax (Appeals) in support of the reasons for the continuous losses. There is no material brought by the Revenue either before the Commissioner of Income-tax (Appeals) or before the Tribunal or even before us to show that these are incorrect figures or that even on the merits the reasons for the losses are not genuine. ....